Housing, Credit Markets and the Business Cycle

13 Pages Posted: 5 Oct 2007 Last revised: 10 Dec 2007

See all articles by Martin S. Feldstein

Martin S. Feldstein

National Bureau of Economic Research (NBER) (deceased); Harvard University (deceased)

Date Written: October 2007

Abstract

The housing sector is now (September 2007) at the root of three distinct but related problems: (1) a sharp decline in house prices and the related fall in home building; (2) a subprime mortgage problem that has triggered a substantial widening of all credit spreads and the freezing of much of the credit markets; and (3) a decline in home equity loans and mortgage refinancing that could cause greater declines in consumer spending. Each of these could by itself be powerful enough to cause an economic downturn. The combination could cause a very serious recession unless there are other offsetting forces. In this paper, I discuss each of these and then comment on the implications for monetary policy.

Suggested Citation

Feldstein, Martin S., Housing, Credit Markets and the Business Cycle (October 2007). NBER Working Paper No. w13471, Available at SSRN: https://ssrn.com/abstract=1019471

Martin S. Feldstein (Contact Author)

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